Arizona expected to see job growth

by Betty Beard - Sept. 17, 2010 12:00 AMThe Arizona Republic

Very soon, Arizona is projected to record something the state has been sorely missing for 31 months: job growth.

The number of jobs in the state, compared with the number a year earlier, is set to increase after declining every month since February 2008. The growth could begin in as little as a month, according to economists.

The turnaround, no matter how small and fitful, can't come soon enough for recession-weary residents. The Arizona Department of Commerce on Thursday said the August unemployment rate reached 9.7 percent, its highest point in 27 years.

The total number of non-farm jobs has been climbing month by month for most of 2010 but has hovered below the break-even mark at which the state is no longer losing jobs. In the August numbers released Thursday, the total number of non-farm jobs was just 0.1 percent below the total of a year earlier.

Several economists, including Aruna Murthy at the Commerce Department, believe that when the September numbers are released in October, Arizona will break through to positive job growth.

University of Arizona economist Marshall Vest, who calculates the numbers differently than the state, believes the milestone already has been met. He estimated that in August the state finally recovered all the jobs it had lost over the past year.

"As we go forward, we'll continue to see positive increases. We should see job growth, but it's not going to be very big, not a big increase by any means," he said.

Tom Rex, an economist at Arizona State University, predicts the numbers will turn positive in September and forecasts "small employment gains on average for at least several more months, with some months up and some down."

Scottsdale-based economist Elliott Pollack said that when consumers start to see the job losses stopping, it will give them a psychological boost and perhaps prompt them to spend more.

"People are feeling a lot better, which is why retail sales are a little better," he said. "But the average person is not done paying down debt. We are making progress, albeit slowly."

How many jobs Arizona has lost and may have gained already is subject to debate because economists use different methods. They also differ in how they adjust job numbers to smooth out seasonal variations and one-time effects, such as the thousands of temporary Census jobs.

Vest believes Arizona has gained about 40,000 jobs since hitting the bottom in January. Pollack estimates 17,000. The Commerce Department, which does not seasonally adjust numbers, had the state 2,000 jobs behind in August compared with August 2009.

Arizona still has some way to go before it can recover the more than 271,400 jobs lost since the recession began in December 2007. Economists predict it will be 2014 or 2015 before the state reaches its pre-recession job peak.

The job market continues to be frustrating and aggravating for thousands of Arizonans.

Donna Bolton, a 63-year-old Apache Junction resident, realized last year that it was time to change careers when the hair-dressing business she had been in 42 years began to dry up. Clients stopped coming, and one salon she worked for closed. She rented a chair at a second one, but too few clients came in.

Following up on advice that now seems familiar, she went back to school to learn a new vocation and trained 10 months to become a medical administrative assistant.

"But even that is hard to get a job at because they are cutting back. They are downsizing all the offices," she said after sending out hundreds of resumes. "It's disheartening when everybody shuts the doors or they don't even call you back."

She hopes the situation will improve when winter visitors return later this year.

High unemployment

Although job numbers have been growing by the month, the state's unemployment rate has been inching up all year as the number of jobs failed to keep up with the growing number of people applying for them.

The August unemployment rate of 9.7 percent is the highest since it reached 9.9 percent in August 1983,when the state was recovering from another severe recession. It had peaked at 11.6 percent eight months earlier.

Economists say it is common for the unemployment rate to rise or remain high as the economy recovers from a recession. The rate measures the percentage of people who say they actively looked for a job in the past month. When jobs start growing, more of the people who gave up start to look for work again.

Both the state and federal rates crept up a 10th of a percentage point from July to August. The federal rate is now 9.6 percent.

The U.S. Department of Labor has calculated that Arizona's broader unemployment rate, which counts not only unemployed workers but those who work part time because they can't find full-time jobs or have given up, is about 18.5 percent.

The U.S. Census Bureau on Thursday reported that Arizona had the nation's second-worst poverty rate in 2009, behind Mississippi. The percentage of impoverished Arizonans was said to have increased from 18 percent in 2008 to 21 percent in 2009.

ASU's Rex, however, thinks the ranking is suspect. The annual poverty estimates have large sampling errors, he said, in measuring the percentage of people believed to earn poverty wages. The threshold was defined last year as $21,954 in income for a family of four.

"There is no doubt that poverty rates in Arizona and around the nation have gone up substantially since 2007, given the severity of the recession," he said. "Similarly, there is no doubt that Arizona's poverty rate climbed more than in most states, based on its poor economic performance, as measured by employment and other indicators. Arizona's percentage-employment losses were among the worst in the nation, and Arizona was one of a few states that was severely hit by the housing situation. But does Arizona have the second-highest rate in the country at 21.2 percent? I would not bet on it."

Job gains in August

The state added 28,200 jobs from July to August, or 1.2 percent, which is slightly lower than the usual August gain of 1.5 percent, according to the Commerce Department. Most of the positions added were seasonal jobs in local education, such as school-bus drivers and cafeteria aides returning to work after a summer break.

The private sector reported a net loss of 800 jobs in August - a weaker-than-usual showing, said Murthy, who is director of the department's economic analysis. Leisure and hospitality, a category that includes restaurants, bars and hotels, shed 4,000 jobs in August, a month in which the sector usually adds about 1,500 positions, she said.

Murthy downplayed the significance of these month-to-month changes and said they could be due to the timing of reporting cycles. She also said it's too early to say whether the drop in hospitality jobs was due to boycotts as a result of opposition to Arizona's tough new immigration law.

The construction industry appears to have stabilized and to have hit bottom in January, she said. Jobs have been slowly increasing this year, and in August that sector increased by 1,900 jobs compared with July. But the industry's 116,300 jobs were still 7.2 percent below August 2009.

Some job sectors are already showing job growth ahead of a year earlier. They include natural resources and mining, with a 9.3 percent gain; employment services (mostly temporary service positions), 9 percent; general-merchandise stores, 5 percent; and private educational services (such as the for-profit schools like the University of Phoenix), 5 percent.